 | LLOYD BLANKFEIN  Chairman and chief executive of world's biggest investment bank, Goldman Sachs Earned more than $70m in 2007 - a record for a Wall Street boss. Took home less than $1m in 2009 Told magazine interviewer last year "I'm doing God's work". |
Goldman Sachs boss Lloyd Blankfein will deny his investment bank bet against its own clients in the US property market at a Senate hearing later.
The under-fire banker will argue that Goldman was simply "managing [its] risk" in betting on market falls.
He will also say that the bank lost $1.2bn (£779m) as a result of the collapse in house prices in 2008.
On Monday, the US Subcommittee on Investigations accused Goldman of profiting at its clients' expense.
According to the subcommittee's chairman Senator Carl Levin, investigations show that Goldman bet on property prices falling, while selling clients investments that depended on a rising market in order to be profitable.
"Goldman Sachs made billions of dollars from betting against the housing market, and it placed those bets in some cases at the same time it was selling mortgage related securities to its clients," he said.
"They have a lot to answer for."
Charge disputed
The investment bank is also accused of fraud by the US regulator the Securities and Exchange Commission (SEC), relating to a specific deal selling mortgage-backed securities.
It is alleged that the bank sold the securities to clients without telling them that a hedge fund involved in putting the deal together had bet on the securities falling in value.
Mr Blankfein will be among the Goldman executives to appear before the committee later.
In a text of his prepared testimony, he said the bank "strongly disagreed" with the SEC's complaint, calling the episode "one of the worst days in my professional life".
"We have been a client-centred firm for 140 years and if our clients believe that we don't deserve their trust, we cannot survive."
He added that the accusation that the bank made money from bets on market falls ("short" positions) was simply not true.
"We didn't have a massive short against the housing market and we certainly did not bet against our clients," he said.
"Rather, we believe that we managed our risk as our shareholders and our regulators would expect."
Other Goldman executives due to appear at the hearing include the chief financial officer David Viniar, and the London-based trader Fabrice Tourre, named in the SEC charges.
The US coast guard has said it will set fire to an oil spill in the Gulf of Mexico on Wednesday as efforts to stem a leak after a rig blast are failing.
Officials are concerned that, unless controlled, the leak could cause one of the worst spills in US history.
Coast Guard Rear Adm Mary Landry has said work on sealing leaks using robotic submersibles could take months.
Around 1,000 barrels are leaking every day after the Deepwater Horizon rig exploded and sank last week.
Eleven of the rig's workers are still missing and presumed dead in the disaster off the Louisiana coast.
Controlled burn
A "controlled burn" would involve setting fire to an area of oil trapped by special containment booms on the water's surface.
| Environmental experts say birds and animals are more likely to escape a burning patch of water than an oil slick, although toxic fumes could endanger wildlife. "We fully understand there are benefits and trade-offs," said Adm Landry. But she noted that with the spill moving toward land, the impact on Louisiana's coastline, which contains some 40% of the nation's wetlands and spawning grounds for countless fish and birds, had to be considered. Controlled burns had been tried and tested before, and had been shown to be "effective in burning 50 to 95% of oil collected in a fire boom", she said. She warned that if the well was not secured soon, "this could be one of the most significant oil spills in US history".
The leaks - about 5,000ft (1,525m) under the surface - were found on Saturday, four days after the Deepwater Horizon platform, to which the pipe was attached, exploded and sank. About 1,000 barrels (42,000 US gallons; 35,000 imperial gallons) of oil a day have been gushing into the sea since the blast. The resulting oil slick now has a circumference of about 600 miles (970km) and covers about 28,600 sq miles (74,100 sq km). The slick is now about 20 miles (32km) off the coast of Louisiana, but wind projections indicate it will not reach land before Saturday. It would have to continue for more than eight months to match the 11m-gallon spill from the oil tanker Exxon Valdez off Alaska in 1989. Possible solutions Workers on a nearby oil platform were evacuated by the US authorities on Monday after the oil slick came dangerously close. British oil company BP, one of the firms operating the rig, has not been able to activate a device known as a blow-out preventer, designed to stop oil flow in an emergency.
Doug Suttles, the chief operating officer for exploration and production at BP, said it had not yet given up on engaging the valve, but was considering other possible solutions. These include placing a dome directly over the leaks to catch the oil and send it up to the surface, where it could be collected by ships. This has only been done in shallow water before and is still two to four weeks from being operational. BP will also begin drilling a "relief well" intersecting the original well, but it is also experimental and could take two to three months to stop the flow. Forty-nine vessels - oil skimmers, tugboats barges and special recovery boats that separate oil from water - were working to round up oil, BP said. An investigation has been ordered into the cause of the leak by the interior and homeland security departments. It will have the power to compel witnesses to testify, and will look into possible violations by the operators of the rig, Transocean.  Source | ||||
| By Anthony Reuben BBC News |
Liberal Democrat leader Nick Clegg has criticised the current electoral system because it is possible for a party to win the election while getting fewer votes than another party.
How is it possible?
Consider this simplified example of an election involving three parties competing in three seats, each of which has 30 voters.
Party A has won the election despite receiving fewer votes than the other two parties. It is possible because there is no value placed on votes in seats that you do not win, so the 11 votes that party C received in seat 2 were effectively wasted. There is also no value placed on having a bigger majority, so gaining extra support in a constituency that you already hold does not help your party very much. This is a problem for parties that have some support in a lot of constituencies, but less concentrated support. In 2005, the Liberal Democrats received 22% of the votes but only won 62 seats, which was less than 10% of the seats in the House of Commons. In the 1951 general election, Winston Churchill's Conservatives won 26 more seats than Clement Attlee's Labour Party despite having received about 250,000 fewer votes. The electoral system means that opinion polls that aim to reflect percentage support throughout the country may be misleading, because what matters is not the total proportion of votes won but the amount of concentrated support that wins seats. | ||||||||||||||||||||||||
 Papaya is a fruit rich in beta-cryptoxanthin |
Obvious choices of fruit and vegetables are not necessarily the healthiest, say researchers.
According to US experts, making simple swaps like eating sweet potatoes instead of carrots and papaya rather than oranges could make a difference.
Foods, like raspberries, watercress and kale, are richer in phytonutrients which may help prevent disease, they told a US meeting.
UK nutritionists said a balanced diet is essential to good health.
The British Nutrition Foundation warned that relying on eating a few select food types to boost health was ill-advised and said there was no such thing as a "superfood".
|  No one food can give you everything you need  Dr Emma Williams of the British Nutrition Foundation |
Experts recommend five portions a day of fruit and veg in a healthy diet.
Plant foods are known to contain "phytonutrient" chemicals that can protect the heart and arteries and prevent cancers.
But the most popular varieties may not be the best, according to US researchers.
They analysed data from US health surveys of people's dietary habits to look at the most common sources of phytonutrients.
They found that for 10 of the 14 phytonutrients studied, a single food type accounted for two-thirds or more of an individual's consumption, regardless of how much fruit and veg they ate overall.
Carrots were the most common source of beta-carotene, oranges and orange juice the most common source of beta-cryptoxanthin, spinach the most common source of lutein/zeaxanthin, strawberries the most common source of ellagic acid and mustard the biggest provider of isothiocyanates.
However, for each of these phytonutrients there was a richer food source available.
Richer foods
Switching from carrots to sweet potatoes would nearly double beta-carotene intake, say the researchers.
Similarly papaya contains 15 times more beta-cryptoxanthin than oranges, while kale has three times more lutein/zeaxanthin than spinach.
Raspberries have three times more ellagic acid than strawberries and one cup of watercress contains as much isothiocyanate as four teaspoonfuls of mustard.
Study leader Keith Randolph, who is a technology strategist for the supplement company Nutrilite, said: "These data highlight the importance of not only the quantity but also the significant impact the quality and variety of the fruits and vegetables you eat can have on your health."
Dr Emma Williams of the British Nutrition Foundation said: "They are right that some foods are richer sources of phytonutrients.
"But at the end of the day, to be healthy you need to make sure you have a varied and balanced diet.
"No one food can give you everything you need."
The findings were presented at the 2010 Experimental Biology conference in Anaheim, California.
 Goldman chief Lloyd Blankfein will speak about the importance of trust |
Goldman Sachs made billions of dollars at the expense of its clients during the collapse of the housing market, a US Senate investigation has found.
The investigation - which obtained Goldman e-mails - said bank executives had misled investors over mortgage-related investments that turned sour.
The Senate panel released its findings ahead of its hearing on Tuesday into the Goldman affair.
Goldman vigorously denies any wrongdoing.
The Permanent Subcommittee on Investigations has been sifting through e-mails and other Goldman documents obtained in an 18-month investigation.
Excerpts from the documents were published Monday, a day before Goldman chief executive Lloyd Blankfein and other top Goldman executives appear before the committee.
'Conflict of interest'
On 16 April, the Securities and Exchange Commission (SEC) filed civil fraud charges against Goldman and one of its executives alleging they failed to disclose a conflict of interest.
| If our clients believe [the charges] we don't deserve their trust Lloyd Blankfein |
The SEC claims that Goldman arranged mortgage investments without telling clients that the portfolio was put together with help from a hedge fund that was betting on them to fail.
Goldman chief executive Lloyd Blankfein released his own statement ahead of the hearing, saying that the firm did not mislead clients and could not survive without their trust.
Mr Blankfein also said that the day he learned that regulators were filing fraud charges against Goldman was the worst of his professional life.
Senator Carl Levin, chairman of the Permanent Subcommittee on Investigations, said on Monday: "I think [Goldman is] misleading the country. There's no doubt they made huge money betting against the [mortgage] market."
The committee provided excerpts of e-mails showing a progression from late 2006 through to the full-blown mortgage crisis a year later.
Mr Levin said the emails show Goldman shifted in early 2007 from neutral to a short position, betting that the mortgage market was likely to collapse.
"That directional change is mighty clear," Mr Levin said. "They decided to go gangbusters selling those securities while knowing they were toxic."
'Widows and orphans'
Goldman, arguably the world's most prestigious investment bank, rejects the SEC charges as wrong in "fact and law".
At the hearing, Mr Blankfein will repeat the firm's argument that it lost $1.2bn (£776,000) in the housing mortgage market during 2007 and 2008.
"If our clients believe [the charges] we don't deserve their trust, we cannot survive," Mr Blankfein says in the prepared remarks.
He also acknowledges that "we have to do a better job of striking the balance between what an informed client believes is important to his or her investing goals and what the public believes is overly complex and risky."
The Senate panel will also hear on Tuesday from Fabrice Tourre, the London-based bond trader who is named in the SEC charges.
On Saturday, Goldman released a series of e-mails from Mr Tourre, in one of which he jokes that he has sold doomed investments to widows and orphans.
Location chosen for European Extremely Large Telescope | |||
 Cerro Armazones enjoys near-perfect observing conditions Europe has chosen the place it wants to build the world's biggest telescope. The observatory will be constructed on Cerro Armazones, a 3,000m-high mountain in Chile's Atacama Desert. The E-ELT (European Extremely Large Telescope) will have a primary mirror 42m in diameter - about five times the width of today's best telescopes. Astronomers say the next-generation observatory will be so powerful it will be able to image directly rocky planets beyond our Solar System. It should also be able to provide major insights into the nature of black holes, galaxy formation, the mysterious "dark matter" that pervades the Universe, and the even more mysterious "dark energy" which appears to be pushing the cosmos apart at an accelerating rate.
Final go-ahead for the E-ELT is expected at the end of this year. The European Southern Observatory (Eso) organisation which is managing the project says it hopes the telescope can be operational by 2018. The estimated cost is in the region of a billion euros. The decision on the E-ELT site was taken by the ESO Council after several years of study at competing locations that included other places in Chile, and in the Canary Islands, Spain.  The 5,500-tonne behemoth could be operating by 2018 Cerro Armazones is just 20km from Cerro Paranal, where Eso operates its Very Large Telescope facility - a suite of interconnected telescopes that includes four units with primary mirrors measuring 8.2m. Like Paranal, Armazones will enjoy near-perfect observing conditions - at least 320 nights a year when the sky is cloudless. The Atacama's famous aridity means the amount of water vapour in the atmosphere is very limited, reducing further the perturbation starlight experiences as it passes through the Earth's atmosphere. Coming up with a workable design has been a challenge. It is impossible to make a monolithic mirror on such a scale and so the primary reflecting surface will be composed of 984 hexagonal segments, each 1.45m in size. The E-ELT will thus be able to gather 15 times more light than the largest optical telescopes operating today. It will also provide images 15 times sharper than those from the Hubble Space Telescope. The huge telescope is one of the major projects listed on a roadmap of research infrastructures that Europe feels it needs to fulfil its scientific goals over the next 20 years. Other facilities range from high-powered laser systems through to a plan to construct the world's most advanced polar ice-breaker. | |||
It is perhaps beyond the ability of an innocent public to believe this, but there is a growing body of evidence that a few mad scientists might have engineered the near-destruction of the American financial system. Except they weren’t scientists, per se – they were unscrupulous, market manipulating hedge fund managers, and we can almost hear them cackling with glee as they haul their ill-gotten billions to the bank.
In a civil suit filed Friday, the Securities and Exchange Commission charged Goldman Sachs with fraud for helping hedge fund manager John Paulson create collateralized debt obligations that he had secretly designed to self destruct. That is, Goldman Sachs, at the direction of Paulson, hand-picked mortgages that were certain to go bad, and stuffed the mortgages (or rather, “synthetic” derivatives of the mortgages) into collateralized debt obligations that temporarily masked the true value of the loans.
Goldman did this for only one reason: to create instruments against which Paulson and other hedge fund clients could bet with virtually no risk. Meanwhile, Goldman cheerfully sold the CDOs to unwitting customers, knowing full well that those customers would be wiped out when the reference loans inevitably defaulted. Goldman and its hedge fund clients also surely knew that the losses on these synthetic CDOs would crash the overall market for CDOs, hobble competing investment banks that had CDOs on their books, and do serious damage to the financial system.
Goldman isn’t the only bank that created these CDOs. Deutsche Bank, UBS, and smaller outfits, such as Tricadia Inc., perpetrated similar scams. All told, well over $250 billion worth of these “synthetic” CDOs were sold into the market in the two years leading up to the financial crisis of 2008. Indeed, there is a distinct possibility that a majority of all the CDOs sold during those two years were deliberately designed to implode by hedge fund managers who were betting against both the CDOs and the financial system as a whole.
For more than three years, the media has swallowed the hedge fund party line that our economic troubles were solely caused by mortgage companies lending too much money to undeserving home buyers. No doubt, there was over exuberance and fraud in the world of subprime lending, but that is not the full story. It is now clear that the so-called “real estate bubble” was fueled by an expanding market for CDOs. And the market for CDOs was driven, in turn, by fraudulent deals similar to the ones that Goldman did for Paulson. In short, we witnessed a classic pump-and-dump scheme, only this time it was writ large, on the scale of the U.S. financial system.
I predict that as the details of this doomsday machine come to light, we will see that the hedge funds that profited from it all know each other well. I predict further that it will become apparent that what ties these hedge funds to each other is a common acquaintance with associates of Michael Milken, the famous financial criminal who pioneered the market for CDOs, and whose criminal debt machine nearly brought the economy to ruins in the 1980s.
John Paulson, who launched his career with the assistance of a host of Milken cronies, including Jerome Kohlberg and Leon Levy, is one of the hedge fund managers in this network. He has been described as a genius by the media, and perhaps that is what he is, but we now know that he abides by the Milken code, which has it that there is virtue in a clever con well-orchestrated. And never in history has there been a more profitable con than Paulson’s. His bets against the CDO market – the market that he helped set up to collapse — earned him more than $3 billion over the course of just a few months in 2007.
Another hedge fund in this network is Magnetar Capital, whose chairman and senior partner is Michael Gross, formerly a founding partner of Apollo Management, which is run by Milken’s closest crony Leon Black. Magnetar featured prominently in the Milken network’s attack on biotech company Dendreon (see “The Story of Dendreon” for details). This hedge fund is currently under SEC investigation for helping to manufacture and sell doomsday CDOs that it was simultaneously betting against with credit default swaps. Reporter Yves Smith, who has been working on this story from day one, reckons that Magnetar’s bogus CDOs accounted, incredibly, for between 35% and 60% of the total demand for subprime mortgages in 2006.
Given that the economy was being set up for a collapse by hedge funds in this network, it is not surprising that it was Milken-affiliated hedge fund managers who were most prominently and vigorously shorting Bear Stearns, Lehman Brothers and other big investment banks that were on the receiving end of the fraudulent CDOs. These hedge fund managers include Greenlight Capital’s David Einhorn (who launched his career with the former top partner of Milken crony Carl Icahn, and likely worked in cahoots with Milken to attack a company called Allied Capital); SAC Capital’s Steven Cohen (who was investigated by the SEC for trading on inside information provided by Milken’s shop at Drexel Burnham); and Third Point Capital’s Dan Loeb (who got his start dealing in Drexel Burnham paper alongside Milken’s former employees at Jeffries & Co.).
It is also important to note that the pump-and-short CDO scam could not have happened without the help of American International Group’s financial products unit, which sold a lot of the credit default swaps that the hedge funds used to bet against the CDOs. That unit at AIG was run by Joseph Cassano, formerly one of Milken’s top lieutenants at Drexel Burnham. Did Cassano know that the CDOs were designed to implode? Perhaps not, but it is safe to assume that his relationships with the hedge funds creating the CDOs influenced his decision to insure them.
It is also a matter of significant interest that Cassano was ordered to stop selling the credit default swaps in 2007, a sure sign that somebody at AIG saw that a cataclysm was imminent, but he did nothing to protect AIG from the massive losses that the cataclysm was sure to entail. When presented with evidence that the CDOs were rotten, Cassano held on to the CDS positions, rather than sell them off to people who, unlike AIG, would not have the resources to pay the hedge funds in the event of defaults.
This is not to suggest that these people hatched some kind of dark conspiracy to destroy America. But it is to suggest that relationships matter a great deal in the world of finance, and there is one network of miscreants that has consistently shown itself willing to profit from crookery, financial destruction and the misery of others.
One thing is certain: we will learn more about this scam in the weeks and months to come. And while news organizations like the New York Times should be commended for bringing bits and pieces of this story to light, their tepid prose fails to convey both the odoriferousness of the short sellers’ misdeeds and the magnitude of a scandal that helped bring the American financial system to its knees.
